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Sanctions at work: Over 1,000 companies have restricted operations in Russia

By Don-Alvin Adegeest

20 Sept 2022

Business

Image: Yale CELI

Over 1,000 companies have voluntarily curtailed operations in Russia since the onset of the Ukraine invasion. Figures from the Yale Chief Executive Leadership Institute (CELI) published its latest list of businesses on 14 September after tracking over 1,200 companies.

The list grades companies on a scale from A to F for the completeness of withdrawal and is updated continuously by the institute, which is led by Jeffrey Sonnenfeld.

While luxury brands such as Chanel, LVMH and Kering were comparatively quick to close stores or suspend operations, other companies, like Lacoste, Quicksilver, Tom Ford and Asics continue to operate.

In markets like Russia it is common for western brands to work with local partners and licenses, however many have chosen not disclose their contractual ties and obligations. Armani, an exception, said in a statement that it “does not operate directly in Russia and the shops operating in the country with the brands of the group are managed by independent franchisees.”

The EU has continued to increase sanctions against Russia, which includes targeting restrictive measures and economic sanctions in order to impose severe consequences for its actions and thwart Russian abilities to continue the aggression.

While sanctions have some positive effects, for some companies it is “business as usual.” Unsurprisingly these include Chinese-owned retail and e-commerce giants Alibaba, Anta Sports and JD.com. Despite international outcries, these companies are “defying demands for exit or reduction of activities,” according to CELI.

Most of the tracked fashion and luxury players have suspended operations until further notice, and are graded with a B. Others, like Nike, have completely exited the market, earning an A. In the early days of companies closing stores Russians were seen to be panic-buying, queueing for brands such as Victoria’s Secret, which closed its doors early in March. The sanctions, however, applies to goods with a value over 300 euros, as set by the EU.

Sanctions aimed to cripple the economy

A white paper published in July called Business Retreats and Sanctions Are Crippling the Russian Economy refutes the narrative that the unity of the world in standing up to Russia has somehow devolved into a “war of economic attrition which is taking its toll on the west”, given the supposed “resilience” and even “prosperity” of the Russian economy.

“This is simply untrue – and a reflection of widely held but factually incorrect misunderstandings over how the Russian economy is actually holding up amidst the exodus of over 1,000 global companies and international sanctions,” the report says.

The authors explain that since the invasion, the Kremlin’s economic releases have become “increasingly cherry-picked, selectively tossing out unfavourable metrics while releasing only those that are more favorable.”

“Our team of experts, using Russian language and unconventional data sources including high frequency consumer data, cross-channel checks, releases from Russia’s international trade partners, and data mining of complex shipping data, have released one of the first comprehensive economic analyses measuring Russian current economic activity five months into the invasion, and assessing Russia’s economic outlook. From our analysis, it becomes clear: business retreats and sanctions are crippling the Russian economy, in the short-term, and the long-term.”

For the full list of companies retreating visit: https://www.yalerussianbusinessretreat.com.

Article sources: Yale CELI; White paper 'Business Retreats and Sanctions Are Crippling the Russian Economy'

Luxury
Russia
Sanctions
War in Ukraine